Student Trap: So Much Loan Debt Companies Won't Hire You

NEW YORK ( MainStreet) -- Student loan debt continues to be a big problem for college graduates, their families and the economy, including this wrinkle: Students may take on so much college debt in pursuit of better jobs that they actually may drive away good employers.

According to an August study by Fidelity Investments:
  • 70% of the Class of 2013 is graduating with debt, averaging $35,200.
  • 59% report they chose a specific major in hopes of securing a higher-paying job.
  • One-half say paying off their student loan debt is now their the top financial goal.
  • 39% would have made different choices related to college planning had they understood the total cost of college.

The problem gets much worse with a report from the public policy group Demos that says about half of U.S. companies check a potential employee's credit before making a job offer -- and about one in seven job applicants are turned down for a job based on a "blemished" credit score.

College grads that fall behind on student loan payments, then, flirt with career disaster. According to the credit reporting agency FICO, a college loan borrower who falls behind on payments can expect a credit score decline of 100 points -- a drop that could well prove problematic in landing that post-college dream job.

Jared Pickens, a senior lecturer in finance at the University of Texas at Dallas, says that the goal with student loans is to make sure they don't exceed 5% to 6% of the gross salary a college student expects to make after graduation.

In real-world terms, that means not taking out a loan that will set you back more than $200 per month if you expect to land a job that pays $50,000 per year, Pickens says.

The calculations will take some research (especially on career fields and entry level salaries) but if more college students did that research, they could save themselves big headaches down the road.

"Remember, student loans are one of the only debts that you cannot get rid of. They'll be with you forever -- even if you file bankruptcy," Pickens says.

Huge student loan debt can also add unneeded pressure to young white-collar professionals.

"Some people have to work high-pressure jobs forever because of the loans they took out," Pickens said. "Student loans will force you to work a certain job. If you're careful with student loans, then you get to choose the career."

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